Cost Segregation Study
Sample Apartment Complex
July 2006
800 Liberty Bldg, Buffalo, NY 14202
716-847-2651
1-800-591-0148 Toll Free
freedmaxick.com
TABLE OF CONTENTS
Section
Cost Segregation Results
1
Graphs
2
Cost Segregation Methodology
3
Project Description and Engineering Breakout
4
Federal Tax Classification
5
Federal Tax Classification Support
6
Photographs
7
Our Team
8
Sample Apartment Complex
Results of the cost segregation study are as follows:
Before
Cost Analysis
Building - 27.5 Year
Land Improvements - 15 Year
Equipment - 5 Year
$
10,273,796
10,273,796
After
Cost Analysis
100.0%
0.0%
0.0%
100.0%
$
6,590,865
1,721,773
1,961,159
10,273,796
64.2%
16.8%
19.1%
100.0%
Total
2006
Additional Depreciation
Total Taxes Deferred
(Cash Flow)
2007
2008
2009
2006-2009
1,085,313
389,843
224,591
211,333
1,911,080
480,794
172,700
99,494
93,621
846,609
After
Year 27.5
Present Value of Cumulative
Taxes Deferred
445,180
593,242
672,224
741,038
552,871
Sample Apartment Complex - Benefits of Cost Segregation Study
August 2005 Half Year Convention
Cumulative present value on taxes deferred at 8%
$
552,871
Total taxes deferred 2006-2009
35% Federal & 9.3% State Tax Rates
$
846,609
Total additional depreciation claimed 2006-2009
$
1,911,080
Year
2005
Subtotal
Total
Original Cost
Depreciation
$
140,135
140,135 $
Depreciation Based on
Segregated Cost Recovery
27.5 Years
15 Years
7 Years
89,899
89,899 $
86,089
86,089 $
Segregated
Original
6,590,865 $ 10,273,796
1,721,773
1,961,159
$ 10,273,796 $ 10,273,796
Building - 27.5 Year
Land Improvements - 15 Year 150% DB
Equipment - 7 Year 200% DB
Equipment - 5 Year 200% DB
Total Recovery Property
-
Total
Segregated Cost
5 Years Depreciation
$
392,232
392,232 $
$
Additional
Depreciation
Computed
568,220
568,220 $
Total
Taxes
Deferred
Present Value
of Cumulative
Taxes Deferred
428,085
428,085
Catch-Up
2006
373,555
239,644
163,568
-
627,571
1,030,783
428,085
657,228
189,642
291,152
445,180
2007
373,555
239,644
147,212
-
376,542
763,398
389,843
172,700
593,242
2008
373,555
239,644
132,576
-
225,925
598,146
224,591
99,494
672,224
2009
373,555
239,644
119,319
-
225,925
584,888
211,333
93,621
741,038
86,318
(32,327)
(32,327)
(32,155)
(32,327)
(32,191)
(32,327)
(32,191)
(32,327)
(32,191)
(83,119)
(133,948)
(133,911)
(133,948)
(133,911)
(133,948)
(133,911)
(133,948)
(133,911)
(133,948)
(133,911)
(133,948)
(133,911)
(16,758)
0
38,239
(14,320)
(14,320)
(14,244)
(14,320)
(14,261)
(14,320)
(14,261)
(14,320)
(14,261)
(36,822)
(59,339)
(59,323)
(59,339)
(59,323)
(59,339)
(59,323)
(59,339)
(59,323)
(59,339)
(59,323)
(59,339)
(59,323)
(7,427)
-
767,063
758,039
749,683
741,987
734,824
728,218
722,077
716,413
711,148
706,293
694,685
677,364
661,331
646,482
632,736
620,005
608,220
597,305
587,201
577,844
569,181
561,159
553,732
552,871
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Total
% of Total
373,555
373,555
373,555
373,555
373,555
373,658
373,555
373,658
373,555
373,658
373,555
373,658
373,555
373,658
373,555
373,658
373,555
373,658
373,555
373,658
373,555
373,658
373,555
46,746
$ 10,273,796 $
100%
239,644
239,644
239,644
239,644
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
29,988
6,590,865 $
64.15%
107,266
101,585
101,585
101,757
101,585
101,757
101,585
101,757
101,585
101,757
50,792
1,721,773 $
16.76%
- $
0.00%
112,963
1,961,159 $
19.09%
459,873
341,228
341,228
341,401
341,228
341,467
341,228
341,467
341,228
341,467
290,436
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
239,710
239,644
29,988
10,273,796
100%
Sample Apartment Complex
Cost Segregation Study
Depreciation Comparison
$1,600,000
1,458,868
$1,400,000
$1,200,000
$1,000,000
763,398
$800,000
598,146
584,888
$600,000
373,555
373,555
373,555
373,555
$400,000
$200,000
$2006
2007
2008
2009
Additional Depreciation 2006 - 2009: $1,911,080
Total Segregated Cost Depreciation
Total Original Cost Depreciation
Sample Apartment Complex
Cost Segregation Study
Total Depreciation
$1,494,220
$3,405,300
Additional Depreciation 2006 - 2009: $1,911,080
As Recalculated (Per Cost Segregation Study)
As Currently Being Reported
Building placed in service: 2005
Cost: $10,273,796
Depreciable life currently being reported: 27.5 years
Depreciable life recalculated: 27.5, 15 & 5 years
Sample Apartment Complex
Cost Segregation Study
Taxes Deferred
480,794
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
172,700
$200,000
$150,000
99,494
93,621
$100,000
$50,000
$2006
2007
2008
2009
Total Taxes Deferred 2006 - 2009: $846,609
(Cash Savings)
Assumes 35% Federal and 9.3% State Rates
COST SEGREGATION METHODOLOGY
The Sample Apartment Complex project required the Detailed Engineering Cost
Estimate Approach to complete the cost segregation study. This approach utilizes
the site plan and a site inspection with photographic documentation. Building and
site improvement assets are identified, quantified and documented.
Asset costs were established using nationally accepted cost estimating manuals
such as R. S. Means Construction Cost Data and Marshall & Swift Valuation
Services. Appropriate unit price factors and/or multipliers were utilized to refine the
unit pricing including location, fees, deflation, and wear and tear depreciation.
Qualified and experienced estimators prepared the worksheets, established the
quantities and completed the costing.
A CPA specializing in cost segregation reviewed each asset and classified them as
real property (27.5 Year), land improvements (15 Year), or personal property (5
Year), and assigned the proper depreciable life for federal tax purposes. The
asset class and associated lives for all personal property and land improvements
are in accordance with Revenue Procedure 87-56, the current controlling Internal
Revenue Service Pronouncement.
PROJECT DESCRIPTION
The Sample Apartment Complex project is an apartment complex containing
approximately 125,393 square feet of livable area located on a 5.896-acre site in
Any Town, USA.
Site improvements include asphalt paved parking areas around the buildings and
some parking area under carports. There is a lighted courtyard with a pool,
whirlpool spa and concrete deck. There is also a tennis court on the complex.
Wall-mounted lights provide site lighting along the concrete walkways.
Landscaping includes irrigated lawn, shrubs, trees, and planting beds.
The apartment buildings are two-story structures built in 1979. Construction
incorporates concrete foundations, slab-on-grade, stucco walls, and sloped roofs.
The complex consists of 75 two-bedroom and 23 three-bedroom units, each with
laundry equipment. Finishes in the units include carpeting, vinyl flooring and
painted walls.
The heating, ventilation and cooling equipment is mounted on grade with
condensing units. Electrical service consists of a main distribution panel and
individual meters for each apartment.
Sample Apartment Complex
123 Main Street
Any Town, USA
PROJECT COST SUMMARY
Site Size - SF
Total Footprint - SF
Total Building Area - SF
Date Of Construction
Placed In Service
Date Of Report
Description
Structural & Mechanical
Site Improvements
Special Mechanical
Special Electric
Personal Property
Totals
Percentages
256,841
62,697
125,393
1979
Aug - 05
July - 06
Life
27.5
15
5
5
5
27.5 Year
15 Year
5 Year
Totals
6,590,865
-
-
6,590,865
-
1,721,773
-
1,721,773
-
-
401,255
401,255
-
-
289,285
289,285
-
-
1,270,619
1,270,619
6,590,865
1,721,773
1,961,159
10,273,796
64.15%
16.76%
19.09%
100.00%
Sample Apartment Complex
123 Main Street
Any Town, USA
Structural & Mechanical
Unit
Cost
Unit
Qty
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
Adjusted
Unit Cost
Total
Cost
Adjusted
Total Cost
Life
Structural
Apartment Buildings
Standard Foundations
Slab on Grade
Basement Excavation
Basement Walls
Floor Construction
Roof Construction
Exterior Walls
Exterior Windows
Exterior Doors
Roof Coverings
Partitions
Interior Doors
Fittings
Stair Construction
Wall Finishes
Floor Finishes
Ceiling Finishes
0.16
1.60
0.05
0.26
2.89
1.88
0.68
0.37
0.23
0.70
4.31
5.36
2.01
0.56
2.00
0.47
3.12
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
0.24
2.35
0.07
0.38
4.25
2.77
1.00
0.54
0.34
1.03
6.34
7.89
7.89
7.89
2.94
0.69
4.59
29,518
295,175
9,224
47,966
533,160
346,831
125,449
68,259
42,431
129,139
795,128
988,837
988,837
988,837
368,969
86,339
575,591
17,806
178,062
5,564
28,935
321,625
209,223
75,676
41,177
25,596
77,902
479,655
596,508
596,508
596,508
222,578
52,083
347,221
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
4.37
0.28
0.03
5.44
6.42
2.10
0.22
5.68
0.60
0.16
SF
SF
SF
SF
SF
SF
SF
SF
SF
SF
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
125,393
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
6.43
0.41
7.89
8.00
9.45
3.09
0.32
8.36
0.88
0.24
806,197
51,656
988,837
1,003,595
1,184,390
387,417
40,587
1,047,872
110,691
29,518
486,332
31,161
596,508
605,411
714,474
233,707
24,484
632,120
66,773
17,806
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
27.5
(1,144,714)
(690,540)
5
Mechanical Systems
Apartment Buildings
Plumbing Fixtures
Domestic Water Distribution
Rain Water Drainage
Energy Supply
Cooling Generating Systems
Sprinklers
Electrical Service/Distribution
Lighting and Branch Wiring
Communications and Security
Other Electrical Systems
Less Special Mechanical & Special Electrical
Total Structural & Mechanical Systems
10,925,735
6,590,865
Sample Apartment Complex
123 Main Street
Any Town, USA
Site Improvements
Site Preparation
Underground Electric Service - 600A
Trenching & Backfill - Underground Power
Water Piping
Fire Water Piping
Fire Hydrant
Trenching & Backfill - Water Line
Gas Piping
Trenching & Backfill - Gas Line
Sewer Line
Trenching & Backfill - Sewer Line
Sanitary Sewer Manhole
Clean Outs
Storm Line
Trenching & Backfill - Storm Line
Catch Basin
Storm Manhole Pre-cast
Asphalt Paving
Asphalt Parking Lot Striping
Pre Cast Parking Bumper
4" Concrete Sidewalk
Concrete Pool Deck
Concrete Patio Pad
Concrete Dumpster Pad
Concrete Transformer Pad
Concrete Curbing
Wood Stockade Fencing
Wood Dumpster Fencing
Fine Grade & Grass Seeding
Medium Tree
Plantings & Beds
Brick Pavers - Patio
Complete Tennis Court & Fencing
Carports
Unit
Cost
0.47
130.50
16.62
12.73
12.73
3,820.00
14.99
10.51
14.99
12.19
27.83
2,825.00
305.00
30.00
22.87
2,125.00
2,165.00
1.98
9.05
56.00
4.39
4.39
4.39
6.00
6.32
9.03
14.15
14.15
0.47
535.00
5.06
21.85
25,500.00
2,350.00
Unit
SF
LF
LF
LF
LF
EA
LF
LF
LF
LF
LF
EA
EA
LF
LF
EA
EA
SF
EA
EA
SF
SF
SF
SF
SF
LF
LF
LF
SF
EA
SF
SF
EA
EA
Qty
194,144
180
180
3,839
214
5
4,053
3,754
3,754
3,740
3,740
2
34
3,075
3,075
39
2
53,670
138
138
15,743
1,540
10,780
720
320
1,135
4,116
205
95,680
395
10,988
10,780
1
98
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
Adjusted
Unit Cost
0.69
192.00
24.45
18.72
18.72
5,620.18
22.05
15.46
22.05
17.93
40.94
4,156.28
448.73
44.14
33.65
3,126.41
3,185.26
2.91
13.31
82.39
6.46
6.46
6.46
8.83
9.30
13.28
20.82
20.82
0.69
787.12
7.44
32.15
37,516.88
3,457.44
Total
Cost
134,248
34,560
4,401
71,883.73
4,007.06
28,100.88
89,385.01
58,047.49
82,790.86
67,061.41
153,133.88
8,312.56
15,256.86
135,722.81
103,466
121,930
6,370.51
156,344.74
1,837.44
11,369.82
101,680.69
9,946.53
69,625.73
6,355.80
2,975.46
15,070.57
85,688
4,268
66,162
310,912
81,800
346,543
37,517
338,829
Adjusted
Total Cost
80,984
20,848
2,655
43,363.31
2,417.23
16,951.64
53,920.82
35,016.70
49,942.94
40,454.28
92,376.83
5,014.49
9,203.58
81,873.74
62,415
73,553
3,842.96
94,313.75
1,108.42
6,858.76
61,338.09
6,000.17
42,001.18
3,834.09
1,794.92
9,091.20
51,690
2,574
39,911
187,555
49,345
209,049
22,632
204,396
Life
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
15
Sample Apartment Complex
123 Main Street
Any Town, USA
Site Improvements
Pool
Pool Pump & Filter
Metal Stair Railing - Pool
Ladder
Underwater Pool Lights
Whirlpool Spa
Rough-in Whirlpool Spa
Mailboxes 4" x 5"
Total - Site Improvements
Unit
Cost
51.50
1,775.00
59.50
815.00
1,375.00
7,800.00
580.00
30.00
Unit
SF
EA
LF
EA
EA
EA
EA
EA
Qty
840
1
5
1
2
1
1
98
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
Adjusted
Unit Cost
75.77
2,611.47
87.54
1,199.07
2,022.97
11,475.75
853.33
44.14
Total
Cost
Adjusted
Total Cost
63,646
2,611
438
1,199
4,046
11,476
853
4,325
38,394
1,575
264
723
2,441
6,923
515
2,609
2,854,198
1,721,773
Life
15
15
15
15
15
15
15
15
Sample Apartment Complex
123 Main Street
Any Town, USA
Special Mechanical
Unit
Cost
Unit
Qty
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
Adjusted
Unit Cost
Total
Cost
Adjusted
Total Cost
Life
2 Bedroom Unit
Stainless Double Bowl Sink
Porcelain Enamel Single Bowl Sink
Dishwasher Hookup
Disposal Hookup
Washer Valve Box Hookup
Hose Bibb
One Piece Shower Unit
Shower Faucet
Shower Rough-in, Waste & Vent
Range Hood Venting
1,330.00
920.00
294.00
144.00
396.00
120.00
875.00
159.00
535.00
43.00
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
75
75
75
75
75
75
75
75
75
75
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1,956.76
1,353.55
432.55
211.86
582.62
176.55
1,287.34
233.93
787.12
63.26
146,757
101,516
32,441
15,890
43,696.13
13,241.25
96,550.78
17,544.66
59,033.91
4,744.78
88,530
61,239
19,570
9,585
26,359.35
7,987.68
58,243.51
10,583.68
35,611.75
2,862.25
5
5
5
5
5
5
5
5
5
5
1,330.00
294.00
144.00
396.00
120.00
875.00
159.00
535.00
43.00
56.50
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
23
23
23
23
23
23
23
23
23
23
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1,956.76
432.55
211.86
582.62
176.55
1,287.34
233.93
787.12
63.26
83.13
45,005.54
9,948.59
4,872.78
13,400.15
4,061
29,609
5,380
18,104
1,455
1,912
27,149.24
6,001.41
2,939.47
8,083.53
2,450
17,861
3,246
10,921
878
1,153
5
5
5
5
5
5
5
5
5
5
665,163
401,255
3 Bedroom Unit
Stainless Double Bowl Sink
Dishwasher Hookup
Disposal Hookup
Washer Valve Box Hookup
Hose Bibb
One Piece Shower Unit
Shower Faucet
Shower Rough-in, Waste & Vent
Range Hood Venting
Clothes Dryer Venting Kit
Total - Special Mechanical
Sample Apartment Complex
123 Main Street
Any Town, USA
Special Electric
Unit
Cost
Unit
Qty
1.10
1.00
1.07
1.25
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
Adjusted
Unit Cost
Total
Cost
Adjusted
Total Cost
Life
2 Bedroom Unit
Duplex Outlet - Television
Duplex Outlet - Refrigerator
Duplex Outlet - Clothes Washer
Duplex GFI Outlet - Countertop
Outlet -Dryer
Outlet -Range
Wiring - Dishwasher
Wiring - Garbage Disposal
Junction Box & Wiring - Range Hood
Door Lights
Patio Lights
Panel A - 100A - 120/208v - 3P/4W - 24c - 38%
Cable Outlet
Telephone Outlet
106.50
106.50
106.50
131.50
245.35
304.85
118.75
125.00
185.90
205.00
205.00
589.00
44.50
64.85
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
150
75
75
300
75
75
75
75
75
75
75
75
150
300
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
156.69
156.69
156.69
193.47
360.97
448.51
174.71
183.91
273.51
301.61
301.61
866.57
65.47
95.41
23,503
11,752
11,752
58,041
27,073
33,638
13,103
13,793
20,513
22,620
22,620
64,992
9,821
28,623
14,178
7,089
7,089
35,013
16,331
20,292
7,904
8,321
12,374
13,646
13,646
39,206
5,924
17,267
5
5
5
5
5
5
5
5
5
5
5
5
5
5
106.50
106.50
106.50
131.50
245.35
304.85
118.75
125.00
185.90
205.00
205.00
589.00
44.50
64.85
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
EA
46
23
23
92
23
23
23
23
23
23
23
23
46
92
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
156.69
156.69
156.69
193.47
360.97
448.51
174.71
183.91
273.51
301.61
301.61
866.57
65.47
95.41
7,208
3,604
3,604
17,799
8,302
10,316
4,018
4,230
6,291
6,937
6,937
19,931
3,012
8,778
4,348
2,174
2,174
10,737
5,008
6,223
2,424
2,552
3,795
4,185
4,185
12,023
1,817
5,295
5
5
5
5
5
5
5
5
5
5
5
5
5
5
3 Bedroom Unit
Duplex Outlet - Television
Duplex Outlet - Refrigerator
Duplex Outlet - Clothes Washer
Duplex GFI Outlet - Countertop
Outlet -Dryer
Outlet -Range
Wiring - Dishwasher
Wiring - Garbage Disposal
Junction Box & Wiring - Range Hood
Door Lights
Patio Lights
Panel B - 100A - 120/208v - 3P/4W - 24c - 38%
Cable Outlet
Telephone Outlet
Sample Apartment Complex
123 Main Street
Any Town, USA
Special Electric
Unit
Cost
Unit
Qty
1.10
1.00
1.07
1.25
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
Adjusted
Unit Cost
Total
Cost
Adjusted
Total Cost
Life
Site & Common
Panel F - 225A - 120/240v - 1P/3W - 24c - 55%
Panel S1 - 225A - 120/240v - 1P/3W - 24c - 33%
Panel S2 - 225A - 120/240v - 1P/3W - 24c - 33%
Panel S3 - 225A - 120/240v - 1P/3W - 24c - 33%
Total - Special Electric
1,636.25
981.75
981.75
981.75
EA
EA
EA
EA
1
1
1
1
2,407.33
1,444.40
1,444.40
1,444.40
2,407
1,444
1,444
1,444
1,452
871
871
871
479,551
289,285
5
5
5
5
Sample Apartment Complex
123 Main Street
Any Town, USA
Personal Property
Unit
Cost
Unit
Qty
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
Adjusted
Unit Cost
Total
Cost
Adjusted
Total Cost
Life
2 Bedroom Unit
12" Wood Shelving
Closet Rod
Base Cabinet laminated
Wall Cabinet laminated
Countertop laminated
Carpet with Pad
Vinyl Composition Tile
4" Vinyl Base
Refrigerator
Cooking Range
Range Hood
Dishwasher
Clothes Washers
Clothes Dryers
Sink Garbage Disposal - Residential
Vertical Blinds
Horizontal Blinds
9.56
3.90
155.00
120.00
53.00
3.54
1.95
1.78
560.00
570.00
224.00
630.00
470.00
560.00
201.00
10.53
3.90
LF
LF
LF
LF
LF
SF
SF
LF
EA
EA
EA
EA
EA
EA
EA
SF
SF
3,150
2,025
1,350
1,200
1,350
65,400
26,850
7,200
75
75
75
75
75
75
75
3,600
7,275
14.06
5.74
228.04
176.55
77.98
5.21
2.87
2.62
823.90
838.61
329.56
926.89
691.49
823.90
295.72
15.48
5.74
44,282
11,619
307,859
211,860
105,268
340,618
77,031
18,856
61,793
62,896
24,717
69,517
51,862
61,793
22,179
55,746
41,743
26,713
7,009
185,714
127,803
63,502
205,475
46,468
11,374
37,276
37,941
14,910
41,935
31,285
37,276
13,379
33,628
25,181
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
Sample Apartment Complex
123 Main Street
Any Town, USA
Personal Property
Unit
Cost
Unit
Qty
Local
Factor
Deflation
Factor
Arch
Fee
OH &
Profit
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.10
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.07
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
1.25
Adjusted
Unit Cost
Total
Cost
Adjusted
Total Cost
Life
3 Bedroom Unit
12" Wood Shelving
Closet Rod
Base Cabinet laminated
Wall Cabinet laminated
Pantry Cabinet
Countertop laminated
Carpet with Pad
Vinyl Composition Tile
4" Vinyl Base
Refrigerator
Cooking Range
Range Hood
Dishwasher
Clothes Washers
Clothes Dryers
Sink Garbage Disposal
Vertical Blinds
Horizontal Blinds
Total Personal Property
9.56
3.90
155.00
120.00
245.00
53.00
3.54
1.95
1.78
560.00
570.00
224.00
630.00
470.00
560.00
201.00
10.53
3.90
LF
LF
LF
LF
LF
LF
SF
SF
LF
EA
EA
EA
EA
EA
EA
EA
SF
SF
1,472
1,288
414
368
46
414
23,989
9,153
2,484
23
23
23
23
23
23
23
1,104
2,921
14.06
5.74
228.04
176.55
360.46
77.98
5.21
2.87
2.62
823.90
838.61
329.56
926.89
691.49
823.90
295.72
15.48
5.74
20,693
7,390
94,410
64,970
16,581
32,282
124,940
26,259
6,505
18,950
19,288
7,580
21,318
15,904
18,950
6,802
17,095
16,760
12,483
4,458
56,952
39,193
10,002
19,474
75,369
15,841
3,924
11,431
11,635
4,573
12,860
9,594
11,431
4,103
10,313
10,111
2,106,316
1,270,619
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
FEDERAL TAX CLASSIFICATION
Section 168 of the Internal Revenue Code determines the method of calculating
depreciation for property placed in service after December 31, 1986. This
property is recognized as recovery property and is depreciated under the
Modified Accelerated Cost Recovery System (MACRS). Classes of MACRS
property are determined largely by reference to the class lives prescribed in
Revenue Procedure 87-56, 1987-2 C.B. 674 (as clarified and modified by Rev.
Proc. 88-22, 1988-1 C.B. 785). The deduction for depreciation of MACRS
property is determined by using the applicable:
 Method of depreciation,
 Recovery period, and
 Convention.
There are three specified methods, eight recovery periods, and three specified
conventions. Each applies to a particular property depending largely on the class
into which the property falls.
According to Revenue Procedure 87-56, Equipment is considered Asset Class
#57.0 (Distributive Trades and Services) and depreciated over five years using
the 200% declining balance method with a switch to the straight-line method in
the first year in which the use of such method results in a larger deduction. Land
improvements are considered Asset Class #00.3 (Land Improvements) and
depreciated over fifteen years using the 150% declining balance method with a
switch to the straight-line method in the first year in which the use of such
method results in a larger deduction. Non-residential real property associated
with these facilities are depreciated over thirty-nine years using the straight-line
method.
MACRS provides conventions for determining the period of time in which
depreciation may be claimed in the year the property is placed in service.
Generally, the half-year convention applies to all property except residential
rental property and nonresidential real property, which are depreciated using the
mid-month convention. The mid-quarter convention must be used, however, for
all personal property if the aggregate basis of personal property placed in service
during the last three months of the taxable year is more than 40% of the personal
property placed in service during the entire year.
FEDERAL TAX CLASSIFICATION (continued)
The relevant property classifications for this project are defined in Revenue
Procedure 87-56, reproduced as follows:
Asset Class #57.0 (Distributive Trades and Services) 5-Year Property
“Includes assets used in wholesale and retail trade, and personal and
professional services.”
Asset Class #00.3 (Land Improvements) 15-Year Property
“Includes improvements directly to or added to land, whether such improvements
are section 1245 property or section 1250 property, provided such improvements
are depreciable. Examples of such assets might include sidewalks, roads,
sewers, fences, landscaping and shrubbery.”
Residential Rental Property, 27.5-Year Property
All construction costs of the building, shell and permanent fixtures must be
depreciated as residential rental property. Examples are the building enclosure,
interior partitions, masonry work, general building electrical, general building,
mechanical, roofing, windows, foundation excavation, building foundations,
structural steel and interior concrete floor slabs.
The relevant tax citations, revenue ruling, and tax court cases which further
support the property classifications used for tax depreciation purposes are
included elsewhere in this report.
Under regulations issued by the IRS that took effect June 21, 2005, we are
required to attach the following statement:
In accordance with Internal Revenue Service Circular 230, we advise you that
any discussion of a federal tax issue in this communication or any attachment is
not intended to be used and cannot used for the purpose of avoiding federal tax
penalties. If you would like a written opinion on one or more of the federal tax
issues addressed above upon which you can rely for the purposes of avoiding
penalties, please contact us and we will explain what is involved and the cost of
such opinion.
FEDERAL TAX CLASSIFICATION SUPPORT
Plumbing Service to Personal Property
Plumbing service to personal property includes supply and drainage to the coffee
station, break areas and cafeteria appliances and cabinet sinks. Plumbing
consists of pipes, fittings, gaskets, traps, drains, valves, pumps, gauges,
brackets and connectors. These items were installed specifically for use with the
personal property to which they relate. Absent the existence of these items, the
personal property would be inoperable.
Revenue Ruling 69-558, 1969-2, C.B. 4 states:
“…electrical wiring and special outlets (and plumbing lines)
…leading directly to, within, and interconnecting with items of
machinery or equipment are not parts of the electrical (and
plumbing systems), but are parts of the particular items of
machinery or equipment to which they directly lead, are within, or
interconnect…”
In Hospital Corporation of America and Subsidiaries v. Commissioner, 109 TC 21
(1997), the Tax Court reaffirmed its decision in Scott Paper Co. v. Comm., 74 TC
137 (1980) and Morrison Inc. v. Comm., No. 34300-83, TCM 1986-129, March
31, 1986 stating that it found no material differences between the facts in the
Hospital Corp. Case and those facts presented in its earlier decisions. In
Morrison Inc. v. Comm., the court focused on the use of the special purpose
plumbing and concluded that it did not relate to the operation and maintenance of
the building and therefore could not be a structural component in accordance
with Reg. Sec. 1.48-1(e)(2).
The court concluded instead, the special purpose plumbing was part of the
Section 1245 property to which it related. In Scott Paper Co. v. Comm., the court
indicated:
“items occurring in unusual circumstances that do not relate to the
operation or maintenance of the building should not be
considered as structural components even though specifically
listed as such in Reg. Sec. 1.48-(e)(2)”
The court held the critical test to be whether the improvements related to the
overall operation or maintenance of the building. The court concluded that the
special purpose plumbing should be considered an extension of the Section 1245
property to which it relates.
FEDERAL TAX CLASSIFICATION SUPPORT
See also Rev. Rul. 69-558, 1969-2, CB. 4; Rev. Rul. 66-299, 1966-2, c. B. 14;
Central Citrus Co. v. Commissioner, 58 TC 365 (1972); Duaine v. Commissioner,
T. C. Memo 1985-39; Texas Instruments v. Commissioner, TCM 1992-306.
Accordingly, the coffee station, break areas and cafeteria plumbing requirements
are accessory to the appliances and cabinet stinks, and thus, qualify as Asset
Class #57.0 (Distributive Trades and Services) for tax depreciation purposes.
Exterior Site Lighting & Electrical
Exterior site lighting includes pole-mounted lights, floodlights, and landscape
accent lights. These assets qualify as tangible personal property in accordance
with Reg. Sec. 1.1245-3(b), as defined by Reg. Sec. 1.48-1(c). In the Senate
Finance Committee Report, Revenue Act of 1978, (S. Rep. 95-1263, 1978-3,
C.B. 315, 410-423), Congress recognized that “special lighting” which has no
more than an incidental relationship to the operation or maintenance of a building
constitutes personal property. Congress cited lighting, which illuminates the
exterior of a building or store as an example. Although Congress excluded
lighting to illuminate a parking area in S. Rep. 95-1263, the court held in
Standard Oil Co. v. Commissioner, 77 TC 28 (1981), that exterior parking lighting
constituted tangible personal property. The court determined that a pole and
lighting fixture attached to a concrete base by four anchor bolts could be easily
removed and moved and should not be considered inherently permanent. They
applied the criteria in the Whiteco Industries, Inc. v. Commissioner, 65 TC 664
(1975, acq., 1980-24 I.R.B. p.5) and found that the pole and lighting fixtures met
the six-point test.
Tangible personal property includes all tangible property except building,
structural components and other inherently permanent items. Rev. Rul. 75-178,
1975-1, C.B. 9 states:
“that the classification of property as personal or inherently
permanent is to be made on the basis of the manner of
attachment to the building and how permanently the property is
designed to remain in place.”
All site lighting fixtures are easily removable and movable, interchangeable, and
not permanently attached. Reg. Sec. 1.48-1(e)(2) includes “electric wiring and
lighting fixtures” as an example of a structural component. Nonetheless, the
courts have generally recognized that the list of structural components in Reg.
Sec. 1.48-1(e)(2) is neither all-inclusive, nor intended to represent assets, which
are structural components under all circumstances. The defining factor in the
definition of structural components is the last item listed, “and other components
FEDERAL TAX CLASSIFICATION SUPPORT
relating to the operation and maintenance of the building.” None of the lighting
included in this category relates to the normal operation of general lighting in the
building.
Accordingly, the site lighting qualifies as Asset Class #00.3 (Land Improvements)
for tax depreciation purposes.
Special Purpose / Decorative Lighting
Special purpose and decorative lighting consists of exterior decorative building
lighting, emergency battery lights, wall mounted remote head emergency lights,
and exit lights.
In the Senate Finance Committee Report, Revenue Act of 1978, (S. Rep. 951263, 1978-3, C.B. 315, 410-423), Congress recognized that:
“special lighting which has no more than an incidental relationship
to the operation or maintenance of a building constitutes personal
property”
In Morrison v. Commissioner, TCM 1986-129, the court reaffirmed congress’s
decision holding that the taxpayer’s emergency lighting constituted personal
property and noted that lighting fixtures and electrical connections that “do not
provide basic illumination” and that are “accessory to a business” do not
constitute structural components of a building. Again in Metro National Corp. v.
Commissioner, TCM 1987-38, 52 TCM 1440, the court concluded that special
purpose, security, decorative, and ornamental lighting are tangible personal
property.
Tangible personal property included all tangible property except building,
structural components and other inherently permanent items. Rev. Rul. 75-178,
1975-1 C.B. 9 states:
“the problem of classification of property as personal or inherently
permanent should be made on the basis of the manner of
attachment to the land or the structure and how permanently the
property is designed to remain in place” The light fixtures in
question are easily removable and movable, interchangeable, and
not permanently attached to the building. They meet the stringent
six-point test developed by the Tax Court in Whiteco Industries
Inc. v. Commissioner, 65 TC (1975, Acq., 1980-24 I.R.B. p.5)
under which much more permanently affixed have been
characterized as tangible personal property.”
FEDERAL TAX CLASSIFICATION SUPPORT
Reg. Sec. 1.48-1(e)(2) included “electric wiring and lighting fixtures” as an
example of a structural component. Nonetheless, the courts have generally
recognized that the list of structural components in Reg. Sec. 1.48-1(e)(2) is
neither all-inclusive, nor intend to represent assets, which are structural
components under all circumstances. The defining factor in the definition of
structural components is the last item listed, “and other components relating to
the operation and maintenance of the building.” None of the lighting included in
this category relates to the normal operation of the building. All of the special and
decorative lighting was intended for a purpose other than providing general
illumination within the building.
Accordingly, the special purpose and decorative lighting qualify as Asset Class
#57.0 (Distributive Trades and Services) for tax depreciation purposes.
Floor Coverings
Vinyl flooring can be found throughout facility. Carpet was specially designated
as tangible personal property in Rev. Rul. 67-349, 1967-2, C.B. 48. The Senate
Finance committee Report, Revenue Act of 1978, (S. Rep. 95-1263, 1978-3, C.B.
315, 410-423), provides additional support stating:
“floor coverings which are not an integral part of the floor itself
such as floor tile generally installed in a manner to be readily
removed (that is it is not cemented, mudded, or otherwise
permanently affixed to the building floor but, instead, has
adhesives applied which are designed to ease its removal)…are
considered tangible personal property and not structural
components”
Vinyl flooring is attached using adhesives in the same non-permanent method as
carpeting.
In Hospital Corporation of America and Subsidiaries v. Commissioner, 109 TC
21, (1997), carpeting and vinyl flooring were determined to be tangible personal
property. The court concludes:
“Carpeting is not an integral part of the floor and satisfies the
criteria for tangible personal property outlined in Whiteco
Industries, inc. v. Commissioner, 65 TC 664 (1975, acq., 1980-24
I.R.B. p. 5)…Petitioners have shown that they did not intend for
the carpeting to be permanently affixed to the underlying floor”
FEDERAL TAX CLASSIFICATION SUPPORT
“applying the Whiteco criteria…vinyl floor coverings are not
inherently permanent. We are persuaded that the floor coverings
were not intended to be, and were not permanent coverings for
the buildings’ floor”
Accordingly, the vinyl flooring qualifies as Asset Class #57.0 (Distributive Trades
and Services) for tax depreciation purposes.
Land Improvements
Land improvements include paved areas, sidewalks, concrete stairs, fencing, site
utilities and landscaping. Landscaping includes trees, plants, shrubs, mulch,
rock, and sod. Although Rev. Proc. 87-56, Asset Class 00.3, cites many of these
items as example of depreciable land improvements, some additional discussion
is warranted.
Section 167 the Internal Revenue Service Code Section 167 sets forth the
general rule that there shall be allowed as a depreciation deduction a reasonable
allowance for the exhaustion, wear and tear and obsolescence of property used
in the trade or business, or of property held for the production of income. Section
167(a)-2 of the Income Tax Regulations provides, in part, that the depreciation
allowance does not apply to land apart from the improvement or physical
development added to the land, which has a limited period of use and experience
exhaustion, wear and tear.
With regards to landscaping as a depreciable land improvement, Revenue Ruling
74-265, 1974-1 C.B. 56, indicated that landscaping that would be simultaneously
retired with a building would be considered a depreciable land improvement.
Other improvements unaffected by the buildings retirement and not subject to
other wear and tear would be considered part of the taxpayer’s basis in land. The
ruling notes:
“the landscaping for shrubbery and grass is interrelated to the
apartment buildings by reason of the site plan design, and
physical layout and construction. The landscaping is not similar to
the general site grading but is similar to grading that would be
retired if the apartment building were removed. The landscaping
is so located as to constitute a primary and integral part of the
overall apartment facilities.”
The ruling held that landscaping consisting of the perennial shrubbery and
ornamental trees immediately adjacent to the buildings is depreciable property
FEDERAL TAX CLASSIFICATION SUPPORT
under Section 167, since the replacement of the buildings will destroy this
landscaping.
Furthermore, in Trailmont Park Inc., TC Memo 1971-212, the court held that the
costs of clearing, grading, terracing and landscaping were an integral part of the
construction and development of a mobile home park and were depreciable over
the same period as the pads, patios, and other improvements. In its Action on
Decision, the IRS conceded that:
“the useful life on the landscaping is comparable to that of other
depreciable improvements such as water and sewer lines and
paving since the construction required in replacing these items
would probably destroy much, if not all, of the landscaping.”
The landscaping surroundings this facility would be destroyed if the building and
other depreciable land improvements were removed. Therefore, using the
rationale of Rev. Rul. 74-265 and the IRS’s position in is Action on Decision of
the Trailmont Park, Inc. case, the cost of the landscaping should be classified as
depreciable land improvements.
Accordingly, the paved area, sidewalks, concrete retaining walls, steel railings,
site utilities and landscaping qualify as Asset Class #00.3 (Land Improvements)
for tax depreciation purposes.
Land Preparation
Revenue Ruling 65-265, 1965-2, C.B. 52, supports depreciating the costs
associated with excavation and grading as part of the cost of the asset for which
they are associated. Revenue Ruling 65-265 states:
“The cost attributable to excavation, grading, and removing soil
necessary for the proper setting of the buildings and paving the
roadways are part of the cost of those assets and should be
included in the depreciable base for the buildings and
roadways…”
Revenue Ruling 68-193, 1968-1, C.B. 79, clarified Revenue Ruling 65-265
stating:
“The cost paid or incurred for the grading, (and excavation) are
depreciable since the grading (and excavation) would be retired,
abandoned, or replaced with the depreciable asset with which it is
directly associated…”
FEDERAL TAX CLASSIFICATION SUPPORT
Revenue Ruling 74-265, 1974-1, C.B. 56; and Trailmont Park, Inc. TC Memo
1971-212 further support this position.
As a result, the site preparation costs for the paved areas and buildings are
essentially part of the cost of construction of these items and should be
depreciated as part of the aforementioned items.
Accordingly, the land preparation costs related to the land improvements
described above qualify as Asset Class #00.3 (Land Improvements) for tax
depreciation purposes.
Signage
Signage includes company identification, parking signs, external & internal
identification signs, directories, and room or department nameplates. Identifying
devices and signs qualify as tangible personal property in accordance with Reg.
Sec. 1.1245-3(b), as defined by Reg. Sec. 1.48-1(c). Reg. Sec. 1.48-1(c) cites as
examples of personal property “neon, and other signs.”
See also Standard Oil Co. (Indiana) v. Commissioner, 77 TC 349, August 12,
1981 and Senate Finance committee Report, Revenue Act of 1978 (S. Rep. 951263, 1978-3, C.B. 315, 410-423). Both held that identification signs qualified as
tangible personal property. Senate Finance Committee Report, Revenue Act of
1978, states that tangible personal property includes:
“identity symbols that identify or relate to a particular retail
establishment or restaurant such as special materials attached to
the exterior or interior of a building or store and signs (other than
billboards)”
Accordingly, signage qualifies as Asset Class #57.0 (Distributive Trades and
Services) for tax depreciation purposes.
FEDERAL TAX CLASSIFICATION SUPPORT
Process Piping
Process piping includes compressed air and central vacuum system piping. The
system consists of pipes, fittings, gaskets, valves, pumps, gauges, brackets and
connectors. These items are used only and directly with the manufacturing
equipment and were installed specifically for that use. Absent the existence of
these items, the manufacturing equipment would be inoperable.
The process piping system qualifies as tangible personal property in accordance
with Reg. Sec. 1.1245-3(b), as defined by Reg. Sec. 1.48-1(c). In Hospital
Corporation of America and Subsidiaries v. Commissioner, the Docket Nos.
10663-91, 13074-91, 28588-91, 6351-92, 109TC 21, (1997), the Tax Court
reaffirmed its decisions in Scott Paper Co. v. Comm., 74 TC 137 (1980) and
Morrison Inc. v. Comr., No. 34300-83, TCM 1986-129, March 31, 1986, stating
that it found no material differences between the facts in the instant case and
those facts present in those cases. In Morrison Inc. v. Comr., the court focused
on the use of the special purpose plumbing and concluded that it did not relate to
the operation and maintenance of the building and therefore, could not be a
structural component in accordance with Reg. Sec. 1.48-1(e)(2). The court
concluded instead, the special purpose plumbing was part of the Section 1245
property to which is related. In Scott Paper Co., v. Comm., the court indicated
that items occurring in unusual circumstances that do not relate to the operation
or maintenance of the building should not be considered as structural
components even though specifically listed as such in Reg. Sec. 1.48 (e)(2). The
court held the critical test to be whether the improvements related to the overall
operation or maintenance of the building. The court concluded that the special
purpose plumbing should be considered an extension of the Section 1245
property it serves.
See also rev. Rul. 69-588; 1969-2 C.B. 4, Rev. Rul. 66-299, 1966-2 C.B. 14;
Central Citrus Co. v. Comm. 58 TC 365 (1972); Duaine v. Comm., T.C. Memo
1985-39; Texas Instruments v. Comm., T.C. Memo 1992-306.
Accordingly, the process piping system qualifies as Asset Class #57.0
(Distributive Trades and Services) for tax depreciation purposes.
FEDERAL TAX CLASSIFICATION SUPPORT
The types of assets qualifying as Asset Class #00.3 (Land Improvements), Asset
Class #57.0 (Distributive Trades and Services) are listed below with the
corresponding tax references. The tax references are used to identify the
various assets listed in this report as personal property and land improvements.
General Description
Tax Reference
Vinyl tile &Vinyl Wall
Coverings, Personal
Property Electrical
Requirements, Personal
Property Plumbing
Requirements, Process
Area HVAC.
IRC Sec. 48(a)(1)(A); Reg. Sec. 1.48-1(c); Senate
Financial Reports 87-1881 (1962) and 95-1263
(1978); Metro National Corp. v. Commissioner, TC
Memo 1986-129; Morrison Inc. v. Commissioner, TC
Memo 1988-582; King Radio Corp. v. U.S. 73-2
USTC; Hospital Corporation of America v.
Commissioner, 109 TC 2; Illinois Cereal Mills, Inc. v
Commissioner, 57 AFTR 2d 86-1342; Scott Paper
Corp. v. Commissioner, 74 TC 137; Shoney’s South
Inc. v. Commissioner, TC Memo 1984-412;
Southland Corp. v. US 80-1 USTC; Whiteco
Industries, Inc. v. Commissioner, 65 TC 664; Central
Citrus Co. v. Commissioner, 58 TC 365; Piggly
Wiggly Southern Inc. v. Commissioner, 84 TC 739.
Texas Instruments v. Commissioner, TC Memo 192306; Standard Oil Co. v. Commissioner, 77 TC 349;
Rev. Rul. 67-349; Rev. Rul. 69-588; Rev. Rul 66299; Rev. Rul. 69-588; Rev. Rul. 75-78; Rev. Rul.
75-178; Rev. Rul. 68-530; Rev. Rul. 68-405.
Paving, Concrete Curbs,
Gutters, Walkways, Steel
Railings, Site Utilities,
Concrete Retaining
Walls, Site Lighting,
Landscaping and Site
Preparation.
Algernon Blair, Inc. v. Commissioner, 29 TC 1205;
Herbert Shainberg v. Commissioner, 33 TC 241;
Aurora
Village
Shopping
Center
Inc.
v.
Commissioner, TC Memo 70-147; Trailmont Park,
Inc. v. Commissioner, TC Memo 1971-212; Rev. Rul.
65-265; Rev. Rul. 68-193; Rev. Rul. 72-96; Rev. Rul.
74-265; Rev. Rul. 75-137.
Apartment Complex